Understanding the Co-Tenancy Clause in a Commercial Real Estate Lease A typical retail shopping center or mall works under a tried and true business plan. The owner and/or developer of the property works first to attract one or more “anchor” tenants and then surrounds them with a variety of smaller tenants who benefit from the traffic they create. Together, the anchor and their supporting …
Commercial Real Estate Blog
How the Development Spread Works
The development spread is a back of the envelope calculation widely used by real estate developers. It is a fast and easy way to size up the financial feasibility of a real estate development project, prior to completing a more in depth analysis. In this article we’ll take a closer look at the development spread and walk through an example of how it is used in practice. What is the Development …
Understanding the Texas Ratio
The retail banking system operates on a fundamental promise between the bank and the customer. The customer opens an account and deposits money in it with the expectation that the bank will continue to stay in business and that the funds will be available for withdrawal when needed. But, history tells us that this isn’t always the case. Throughout history, there is a long list of notable bank …
Understanding the Construction Draw Schedule
In some ways, a commercial real estate construction project is just like any other project. There is a start date, several interim milestones, and an end date when the property is complete and a certificate of occupancy has been issued. However, a commercial real estate construction loan is not like other loans. It is distinguished by the fact that the loan balance starts at $0 and rises over time …
[Read more...] about Understanding the Construction Draw Schedule
How The Double Net Lease Works
There is a wide spectrum of lease types in commercial real estate. To make it easier to communicate with others, it is not uncommon for complicated leases to be described using simple language. The ‘double net lease’ in commercial real estate is a term that describes a certain type of lease agreement, but it’s not always as simple as it might sound. In this article we’ll take a closer look at the …
How to Calculate an Interest Reserve for a Construction Loan
There’s no doubt about it, construction lending is tough. From changing interest rates, long lead times, and freak weather events, there are a myriad of risks that can derail a project. However, from a lender’s perspective, there’s one risk that is top of mind when making a construction loan - the borrower’s ability to make their loan payments during the construction term. To protect …
[Read more...] about How to Calculate an Interest Reserve for a Construction Loan
Eleven Types of Risk in Commercial Real Estate
Every investment involves a certain amount of risk. There are certain general sources of risk that influence all assets – things like geopolitical risk and global macroeconomic risk. What makes each asset unique is the level of sensitivity that its rate of return has to those risks. In addition, specific types of assets have risks that are uniquely their own. In this article, we’ll look at eleven …
[Read more...] about Eleven Types of Risk in Commercial Real Estate